Social Security payments scheduled to rise just 2% next year
Posted on November 10, 2017
This is good news and… not so good news. Sure, this social security COLA (cost of living adjustment) increase is the biggest boost since 2012, but not nearly enough to keep up with rising costs, say the CPAs at Teipen, Selanders, Poynter & Ayres.
The adjustment, announced in late October by the Social Security Administration, will begin in January of 2018 and boost the average beneficiary check by $27.38 a month, or about $329 a year.
Although the increase is the largest since a 3.6% hike in 2012, it follows a minuscule 0.3 percent increase in 2017, and no change in 2016.
The staff at TSPA also reports that the maximum amount of earnings subject to Social Security tax, now $127,200, will climb to $128,700 next year.
This year, 42 million retirees are receiving Social Security payments averaging $1,377 a month, or about $16,524 a year. With the 2018 COLA, payments will average $1,404 a month, or $16,848 a year.
“So,” says AARP CEO Jo Ann Jenkins, “for the tens of millions of families who depend on Social Security for all or most of their retirement income, this cost of living increase may not adequately cover expenses that rise faster than inflation, including prescription drug, utility and housing costs.”
She’s absolutely right. Here are some quick points of reference:
- Average consumer electricity bills are up about 3.5% over 2016
- Food prices are up 2.5% this year and expected to rise more next year due to extreme weather-related events
- Insurance and medical care prices are rising more than at any time in history
- In 2018, this COLA will be large enough to allow for an increase in Medicare Part B premiums, an unfortunate side effect of not having a substantial Social Security COLA recently.
For many beneficiaries, this small adjustment will be wiped out by increases in Medicare premiums and other health care costs.
To summarize, TSPA CPAs note that inflation remains relatively flat, which is good news for many of us. Unfortunately for those on fixed income however, they are going to continue to feel the pinch, as this new cost of living increase does very little to alleviate that.